Loans

Currently in the United States, 44 million Americans owe $1.56 trillion worth of student loan debt. This is a number that is set to continually rise and hit the $2 trillion mark in the next few years. Everyone knows that were at a crisis level with student debt, yet colleges don’t care. They continue raising tuition through the roof and is forcing many young millennials to think twice about going to college.

TD Ameritrade worked with The Harris Poll to take a look at the impact of the student loan crisis and how it was affecting students today. This amount of debt is doubled only in the last decade. This is the first time we’ve really seen this change to where debt is accumulating more rapidly than it ever has before. In a short amount of time.

The pull over 3000 students from the youngest two generations, Gen Z who is entering college for the first time, and younger millennials who are nearing graduation. The study was called the 2019 Young Americans & College Survey. Looked at finding out whether there’s been a major attitude shift towards going to college. Of course, the answer is yes, there’s been a massive shift.

We used to believe that when she graduated high school you went on to college. Going to college was necessary and it was expected that you do so. Not going to college equated to making much less money and being one of the poorest Americans living paycheck to paycheck. There was no understating the value of a college education.

The Massive College Shift

As the Great Recession hit the economy over the past decade, many millions of Americans found themselves without work. They thought would many people do when they graduate high school. They’re desperate to find work and felt that the only good, quality work out there required degrees. The problem is, colleges knew that people were desperate to make more money.

Many schools have been caught lying and making promises about job placement rates. They pushed ads into the American mainstream and it enticed millions of people to go back to school. When it was found that of the schools lied about their job placement rates to get more people in the door, that this meant that there are more people with outstanding student loan debt and no job to pay for it.

While this is happening, colleges are raking in billions and billions of dollars. They keep dramatically increasing the cost of tuition while siphoning off money from the government. It’s almost as if the entire education system decided to become crooked and value profit over anything else. The youngest generations are seeing this happen and are deciding not to stand for it.

Putting Off College

While college is still seen as a must after high school by most, it seems as if the shift is starting to take place. 25% of young students are deciding to put off going to college according to the survey. The main reason why this is happening? Cost. 1-in-5 don’t believe they’ll ever go to college. It’s not worth the investment for them.

Going to college is almost the equivalent of financing a brand-new car. You find yourself tens of thousands of dollars in debt and making payments, including paying attentional interest, for the next 10 to 20 years of their lives. This type of arrangement is hurting millions of lives, as many young adults are putting off making major life decisions, like getting married and having a baby. They simply cannot afford to do anything but live as cheaply as possible while paying off their student debt.

 “There are some students who are saying a four-year traditional degree may not be for me,” Dara Luber, TD Ameritrade’s Senior Manager of Retirement, told Yahoo Finance’s YFI AM on Tuesday. “There’s always going to be a need for those who go to trade schools. So, there could be a shift in how you’re approaching life after high school.”

The Study

This study found that 20% of all young millennial’s out there have over $50,000 worth of student loan debt. The students are also expected to be paying off this debt well past the age of 50. That shows that there are less people able to pay their debt and more were going into default.

“More students are seeing the need to not only go to college, but I think part of the increase in the debt is also the need or the feeling that you need to go on to go to grad school to achieve the right job,” Luber said.

“They [parents] understand what it is to have to pay back those loans, and how much it could impact not only for themselves, but for their students, future retirement savings, being able to buy their first home, get married, and have children. All those downstream impacts of having to pay back their student loans when they get out of college,” Luber said.

As the student debt problem keeps getting worse, many politicians are looking at solutions. Many 2020 Democratic presidential candidates want to wipe the slate clean. The problem is, that puts taxpayers in line to pay the $1.53 trillion students owe. Yet, there might be a better way to take care of student loans. It’s called the “income share agreement.”

For many, getting a college degree is like an investment. You put a lot of money into it and hope it helps you get quality employment when you graduate. But, what if you getting a college degree was an investment from someone else? Let’s say a wealthy person makes an investment into a college. In turn, the college uses that investment to pay for your tuition.

The investment can pay for all of your tuition or part of it. The students who receive this investment money will most likely be the most vulnerable. If a number of investors are willing to jump in, the number of students who can be helped jump as well. So, what do the investors get out of the deal? That’s the interesting part.

Rather than being beholden to a loan company, you would pay back the investor. You would make an agreement with them to pay back the loan with a certain percentage of your future income. This is why it’s called the “income share agreement.”

Student Loans and the Income Share Agreement

“It’s a way for the school to say to students, ‘You’re only going to pay us if we help you succeed’,” explains Beth Akers, co-author of the book “Game of Loans.”

Andrew Hoyler was thrilled when Purdue University got him an ISA loan. He will now only pay back 8% of his income to over the debt.

“After that 104-month term ends, if you still owe money, it’s forgiven, forgotten, you don’t owe another penny,” he says in my latest video. “Now, if I find myself in a six-figure job tomorrow, there’s a chance that I’ll pay back far more than I took out.”

Hoyler says it wouldn’t be a big deal if he paid back more than he owed. He would have a secure job and income, so he would have the security he needed. It’s about not having to pay more than you can afford at any given time. Most student loans are unaffordable to people struggling to get by. They have to pay back the amount regardless of what they’re making.

 “It may also sway students away from majors that don’t have job prospects,” says Hoyler. ISA recipients learn “not only what a career may pay, but how stable it may be, what the future is like.”

Many people have questioned whether canceling all student debt is the answer to the crisis going on right now. Currently in the United States, 44 million people owe $1.53 trillion. This is a crisis that is getting worse and is expected to hit the $2 trillion mark very soon. It’s causing a major problem in the lives of young adults who are struggling to make it.

A new survey conducted by Consumer Finances looked at who was more impacted by the crisis. It turns out that young adults are being impacted more than anyone realized. Is forcing many millennials to move back home with their parents after they graduate college. This new analysis of the data finds that we overestimated exactly how much money they make after college.

People living at home have more spending money than those who are struggling with their debt. By living at home, they don’t have to worry about rent and other major bills. Their parents are taking care of the finances. But, if they were living on their own, the data would reveal that the younger generation is poor.

Do We Have It All Wrong?

Matt Bruenig is the founder of a progressive think tank called the People Policy Project. Bruenig said in an interview that “the debate raging over whether recent proposals from Presidential candidates Bernie Sanders and Elizabeth Warren unfairly benefit the well-off are on shaky ground.”

“If we’re going to basically talk about how fair the student-debt forgiveness plans are and your notion of fairness has to do with whether it is distributively equal,” Bruenig said. “You have known what the distribution is and this data source does not allow you to know this distribution very well.”

One of the biggest complaints about offering complete and total student loan forgiveness is that it would benefit many wealthy people. Not everyone going to college is poor or comes from a lower-class background. You have many Ivy League schools full of students with millionaire and billionaire parents who can afford to pay for their kid’s education.

It’s mostly the poorer students who are taking out student loans to afford to get a degree. They just want to make life better for themselves. So, the argument that wealthy people would benefit from student loan forgiveness might not have any place in reality. It would mostly impact the lower-class who would then have an easier time finding a job and moving out on their own after they graduate.

Presidential Candidates

So far, most of the Democratic candidates running for office in 2020 have offered their own plans and ideas for offering student forgiveness. Each plan is progressive and effectively helps young adults in this area. President Trump, on the other hand, has done very little to curb this problem.

He has recently signed an executive order making it easier for disabled veterans to get their student debt completely wiped. Otherwise feels it’s unfair for taxpayers to wipe out a $1.53 trillion debt. He says if you take out student loans, that’s a decision you made. Others shouldn’t have to pay for it. We’ll have to wait and see what the future holds for this growing problem.

Comedian Hasan Minhaj Tells Congress that Student Debt is a “Paywall to the Middle Class”

Currently in the United States, 44 million Americans owe $1.53 trillion in student loan debt. It’s such a major problem that many economists are saying it is creating an economic crisis. These young Americans are being forced to put off major life decisions, like getting married, having children, buying health insurance, and so much more.

It’s also a major issue being debated during the 2020 presidential race. Nearly every single Democratic candidate has put forward their plans for tackling the issue, including forgiving all $1.53 trillion owed. Many others want free college tuition offered to everyone. Whether these issues become reality or not is unknown, but that’s not stopping anyone from talking about it.

Comedian Hasan Minhaj, host of Netflix’s series “Patriot Act”, recently testified before Congress to talk about the issue. “You know the student loan crisis is bad when I’m asked to testify before Congress about it,” comedian Hasan Minhaj tweeted on Tuesday.

“You don’t need to be drowning in debt to understand that this is an issue sidelining millions of Americans,” said Minhaj, 33. “People are putting off marriage, kids, homeownership and retirement, ―especially my generation.”

‘We’ve put up a paywall to the middle class.’

Minhaj, who has his own show on Netflix, used to be a Daily Show correspondent. His shtick included comedy that mixed facts with statistics to talk about broad issues, like student loan debt. During one of his recent shows, Minhaj took on the subject of student debt. He discussed how confusing and frustrating the entire process is from beginning to end.

During this particular episode, Minhaj polled the audience of 200 members and found together they owed over $6 million towards their student debt. That was more money than they had spent creating the entire set of the show.

“Now granted, our audience is mainly unemployed poli-sci majors, but that’s still a lot of money,” he said, joking with the congressional committee.

“People aren’t making more money, and college is objectively way more expensive,” said Minhaj. “And yet many borrowers are still treated like deadbeats because the government has put their financial futures in the hands of predatory for-profit loan servicing companies.”

This is certainly a difficult subject that doesn’t appear to be solved anytime soon. President Trump has taken the stance that people with student loan debt are responsible for the loans they have taken out. He has signed an executive order, allowing disabled veterans to receive full forgiveness with zero tax impact.